Getting into old age without proper financial support can be very bad experience. The rising cost of living, healthcare, other amenities compound the problem significantly. No regular income, a dwindling capacity to work and earn livelihood at this age can make life miserable. A constant flow of income, without any work would be an ideal solution, which can put an end to all such sufferings. But how is it possible?

The ‘Reverse Mortgage Scheme’ officered by some of the leading banks in India could bring the required answers to the suffering senior citizens. Most of the people in the senior age groups, either by inheritance or by virtue of building assets have properties in their names but they were not able to convert it into instant and regular income stream due to its illiquid nature. The Union Budget 2007-2008 furnished a great proposal and introduced the ‘Reverse Mortgage Scheme’ for our silvers.

Reverse mortgage as its name suggests, is exactly opposite to a typical mortgage such as home loan. In a typical mortgage, you borrow money in lump-sum right at the beginning and then pay it back over a time using Equated Monthly Installments (EMIs). In reverse mortgage, you pledge a house property you already own and the bank in turn gives you a series of cash-flows for a fixed tenure. This can be thought of as reverse EMIs. Thus under reverse mortgage scheme, your property pays you a similar income. The good thing is that the person who ‘reverse mortgage’ his property can stay in the house for his/her life and continue to receive much needed regular income.​The draft guidelines of reverse mortgage in India prepared by Reserve Bank of India have the following features:

Any house owner over 60 years of age is eligible for a reverse mortgage scheme.

The maximum loan is upto 60% of the value of the residential property.

The maximum period of property mortgage is 15 years with a bank or HFC.

The senior citizen can opt for a monthly, quarterly, annual or lump sum payments at any points at his/her discretion.

The amount received through reverse mortgage is considered as loan and not income; hence the same will not attract any tax liability. The interest rates can be fixed or floating.

How is the loan amount paid?

With a reverse mortgage scheme, no payments are required to be made during the life of the senior citizen/s availing the facility. Even after the maturity they can continue to stay in the house. Only when owners leave the house property permanently, or in case of death of both spouses, the Bank will sell the property and from the proceeds it will take the amount that is payable to the bank, the balance will be distributed to legal heirs according to Will written by the senior citizen. In most areas where appreciation is good, the value of the house property grows at a much faster rate than the loan balance. Therefore, the remaining equity also continues to grow and help senior citizens/their legal heirs in the long run. It is also possible your children get more at the time of death after adjustment of ‘loan’.